New guidance from HMRC states that COVID-19 tests purchased by employers are classed as a taxable benefit in kind.
Benefits in kind are benefits that employees receive from their employers that are not included in their salary. A cash value is assigned to taxable benefits in kind, and employees pay income tax on this amount through Pay As You Earn (PAYE).
HRMC's updated guidance now means that employees who require frequent testing, including healthcare and hospitality, could be left out of pocket.
And, as a result, MPs are urging the Government to look into the matter. Ben Everitt, MP for Milton Keynes North, says that it is "baffling" and "wrong".
He told MKFM: "I've been in touch with the Treasury and the Treasury Select Committee. It's being looked into and - I would hope - sorted quite quickly. If not, I'll certainly be following up."
Chair of the House of Commons Treasury committee, Mel Stride, has even written to Chancellor Rishi Sunak about the new guidance. The Tory MP warned many key workers could be faced with the "perverse incentive of avoiding employer-sponsored tests in order to reduce their tax bill".
In his letter to the Chancellor, Mr Stride wrote: "Given that many employers will require these tests on a regular basis, especially in health care settings but also in many other industries (such as hospitality), the tax bills could soon mount up and this does not seem to be a helpful policy at this time."
Currently, anyone in England and Wales who has symptoms of coronavirus, whatever their age, can get a free test through the NHS.
Additional Reporting by Sky News